Many people look forward to the day when they finally can sign up for Medicare. But not everyone feels that way.
A Money Talks News reader named Reuben sent me this question:
“Stacy, is every American at age 65 required to sign up for Medicare? Please advise.”
This is an important question for anyone approaching 65. And in truth, it breaks down into two smaller questions:
Are you entitled?
Not everybody is automatically entitled to get Medicare. Like Social Security, you have to pay into Medicare in order to be able to use it. (Find out if you’re eligible here.) But if you’re eligible, this should be your go-to health insurance during your golden years. For most people, it’s the least expensive and most comprehensive protection out there.
Also, you’ve been paying for it all these years; might as well use it.
Are you required?
You won’t go to jail for not signing up for Medicare. You’re not required to use it.
Medicare has several parts. Part A covers hospitalization. That doesn’t have a monthly premium, so there’s really no reason to delay signing up for it. (You can sign up for Part A alone.)
Part B, which covers doctor visits, has a monthly premium based on your income. Since this cost can be substantial — the standard minimum monthly premium for 2021 is $148.50 — when people talk about delaying Medicare, they’re really talking about delaying Part B.
So, should you sign up? Well, if you’re not working and not covered by someone else, such as a spouse, you definitely should. You’re crazy not to have health insurance at any age, but especially when you’re 65-plus.
You’ve got a seven-month period — three months before you turn 65, the month you turn 65, and three months after you turn 65 — to sign up for Medicare. If you don’t do it during that time and want to sign up later, you’ll typically pay a penalty in the form of higher monthly premiums for life.
The logic here is simple: If you save money by not signing up when you’re 65, then sign up later when you need coverage, you effectively gamed the system, so you should be penalized with higher premiums.
Bottom line? As you approach your 65th birthday, sign up for Medicare. Pay attention: Don’t miss this window.
Note: When you sign up for Social Security, you’re automatically enrolled in Medicare, so you won’t have to worry about signing up.
When you might not want to sign up
There are situations when delaying enrollment makes sense and is penalty-free.
For example, if you’re working after age 65 and are fully covered by your employer, there is no point paying for Medicare Part B. The same could be true if you’re covered by your spouse.
Note, however, that Medicare rules differ depending on how many employees your employer has.
If your employer has fewer than 20 employees: Employees participating in the company health insurance must enroll in Medicare when they become eligible, because it will be your primary insurance. Any employer-provided insurance is secondary. (There’s no law against your employer subsidizing the cost of your Part B premium.)
If your employer has 20-plus employees: It can’t require, or even encourage, you to sign up for Medicare. The employer’s policy is the primary source of coverage, Medicare is secondary. If you have adequate coverage at work, you can delay signing up without a penalty.
To summarize: You can forgo Medicare if you have insurance elsewhere and you are either actively employed by an employer with 20-plus employees or covered by someone else’s insurance. However, don’t guess: Ask whoever is in charge of employee benefits and get a definitive answer.
Once you stop being actively employed, or the spouse covering you stops being actively employed, you’ve got eight months to apply for Medicare without penalty.
If you are not working elsewhere, you don’t have health insurance and you’re eligible for Medicare, you may not be required by law to sign up, but you are required by common sense.
So, go ahead and sign up unless you’re already covered. And if you are covered by an employer, tell them what your situation is. Make sure you have it right.
About me: I founded Money Talks News in 1991. I’m a CPA, and have also earned licenses in stocks, commodities, options principal, mutual funds, life insurance, securities supervisor and real estate.